Banks ‘HOLD FAST’ to Conservative Lending Policy
There’s a scene in Master and Commander when an old salt holds his knuckles up to a boy sailor in the middle of a battle. His knarled fingers bear the tattooed inscription: HOLD FAST.
Whilst I’m not suggesting that builders start tuning into LA Ink for design tips on body art, you may wish to heed Australian Banking Association chief executive Steve Munchenberg’s forecast that ‘banks are especially wary of lending to commercial property borrowers because the sector was hard hit by the downturn.’
This news comes as no surprise to developers and construction companies whose opportunities are being frozen by conservative funding polices issued by banks as well as non traditional lenders.
The Reserve Bank governor Guy Debelle has shed some positive light on the issue, contending that whilst competition between banks for small business has fallen, the improving economy would entice small banks and non-bank lenders to return to small business sector. ”I would think we would see increased competition, in large part because we’re looking at an economy which is growing pretty well with some pretty good opportunities.” He said.
The big question is ‘when will we see this increased competition, and how far will the lending envelope be pushed?’ Strategic soothsaying is no salve for those struggling at the coalface to meet fixed costs and commence new contracts!
So, what to do? Put aside an hour. Get on the phone, do some research and test the rhetoric. Water tight contract vs Funding. If it was the UFC, you’d be ‘tapping-out’ in the first round. There’s a dearth of funders willing to back construction industry projects in Australia.
‘Right now, I think we’re the only one (debtor financier) that’s supporting this sector (construction),’ claims Daniel Dunsford, Director AR Cash Flow. ‘It’s a very time-intensive sector to work in, but because of our experience in construction, we know the pitfalls and can work around most of the challenges our clients throw at us.’